Net Cash Value

Purchase term insurance for the original face amount that continues for as long as the cash value will carry it — The extended term option uses the net cash value as a single premium to buy term insurance in the amount of the original face value, keeping the full death benefit in force for a limited period - the period the cash value will support. This differs from the reduced paid-up option, which buys a smaller permanent policy, and from the cash option, which pays the surrender value out. The three nonforfeiture options are covered in objective LIFE-II.E.8.

National insurance concept

Apply the net cash value to purchase paid-up term insurance equal to the original face amount for as long as the value lasts — When no election is made at lapse, the automatic nonforfeiture option in most whole life policies is extended term insurance: the net cash value is used as a single premium to buy term coverage equal to the original face amount, which continues for as long as the cash value can support it. The three nonforfeiture options are cash surrender, reduced paid-up, and extended term. Because most policyowners do not make an election, the automatic extended term option protects the insured from losing all coverage. If the cash value is exhausted, coverage ends without further value. This rule reflects the law's concern that cash values should never be forfeited by a lapse.

National insurance concept